A very good morning to you all. On behalf of the Board and management of the Standard Bank Group, thank you for joining us for the presentation of our financial results for the 2025. This has been a half of continued good progress towards our financial and strategic targets. The Standard Bank Group continues to do what we say we will do. As is customary, I will begin by placing this half's financial and strategic achievements in their broader context.
Our Chief Financial Officer, Doctor. Arnold Denker, will then take us through the results in detail. I will conclude by describing the immediate and medium term outlook for the group. As our presentation today will show, we remain Africa's largest and most capable financial institution. Our performance was pleasing, and our prospects are bright.
Starting with the macroeconomic environment in this half. The main feature of the period was the United States administration announced and then began to implement new trade policies. These have raised tariffs to levels last seen in the nineteen thirties. The direction, scale and pace of these policy changes were all unexpected, causing market volatility to spike, investor and consumer confidence to decline and global growth expectations for this year to be reduced. In most of Sub Saharan Africa, inflation eased, allowing most central banks to hold or decrease rates.
In South Africa, inflation was lower than expected and interest rates declined by 50 basis points over the half. Sentiment in South Africa and in the economy was negatively affected because The United States is South Africa's second largest trading partner, because of other tensions between the two countries, and because of uncertainty around the national budget process. This resulted in growth expectations being lowered as the period progressed. Despite this worsening outlook, the Standard Bank Group performed very well over the half. Arnaud will shortly discuss the numbers in more detail, so I will only point out a few highlights.
Earnings grew well. Net fee and commission earnings were up 12%, and CIB's trading revenue was up 22. Headline earnings were up 8%, and headline earnings per share were up 10%, with the difference largely explained by the share buybacks. Our balance sheet remained highly robust with our common equity Tier one ratio at 13.2%. Looking at the return metrics, we are particularly pleased to be able to report our best ever group cost to income ratio of 49.4%.
Our return on equity was an equally pleasing 19.1%, the best this has ever been under the current regulatory capital requirements. These group numbers reflect strong franchise performance in each of our business units. The next few slides list some highlights from each business unit. I will pick one or two measures from each of these to illustrate the strength of our franchise. Starting with corporate and investment banking.
We achieved a record 123,000,000,000 in investment banking origination and earned almost R12,000,000,000 in trading revenue from client and market activity market making activity. Turning to business and commercial banking. During the half, BCB gained 65,000 new clients, and deposits from clients grew to over half a trillion rand. Our new highly competitive acquiring platform enabled us to grow the number of businesses using our point of sale devices by 19% on the prior period. In South Africa, disbursements to BCB clients grew strongly, thanks to quicker digital credit scoring, the introduction of structured debt capability and excellent uptake of our BizFlex offering, which is a cash flow linked lending solution.
In personal and private banking, we now have over 16,000,000 clients who are doing more with us. Net fees and commissions from retail clients in South Africa grew by a pleasing 11%, and revenue from value added services grew by 24% half on half. The insurance and asset management business had a strong half. In insurance, new business value was up 11%. In short term insurance, gross written premiums were up 10%.
On the investment side, assets under management or administration were up 10% to R1,600,000,000,000 and cash flow into Stanlab's unit trusts more than doubled. Collaboration between PPB and IIM continued to accelerate over the half. Through this collaboration, we are reaching more of our clients with a broad range of competitive insurance and investment solutions. We are doing so digitally and via our broker and branch network. With flexible life sales up more than 50%, gross written premiums for funerals up 20%, and policies sold by our financial advisors up 10%.
We're making good progress on insurance. On the investment side, more than 85% of our core discretionary and money market funds outperform peers. We believe that there are large opportunities ahead for PPB and IIM collaboration both in South Africa and over the medium term in Africa regions. Our technology underpins and enables the strategic progress of our business units and in turn, our group results. Highlights of the half include, first, the fact that 60% of client queries were successfully resolved by our chatbot in the mobile app in South Africa.
Second, that we are in our twenty sixth straight month without a serious outage group wide and that we are rated first in South Africa for stability by down detector. Third, that we continue to prevent material cyber incidents despite incessant attacks by well organized criminal syndicates. Fourth, that we now have 57% of our computing across the group in the public cloud, which improves the time it takes to deliver client features and improves the resilience and efficiency of our infrastructure. As I have mentioned at the start of this presentation, Standard Bank does what we say we will do. This is a tribute to the expertise, the professionalism, and the discipline of our people and also reflects a high level of diversification and sheer scale.
As shown on the left hand graph, our banking income has risen at a compound annual rate of 10% since the 2020. Our efficiency, as measured by our cost to income ratio, has improved by 800 basis points over the period. In the middle block, you can see that headline earnings have risen at an average rate of 26% over these five years, and as I said, group ROE is now at a record high of 19.1. And on the right hand side, we show the diversity of our earnings this half, 49% from South Africa, 41% from Africa regions, 6% from our offshore business and 4% from our share of ICBCS. I now hand you over to Anu to discuss our financial performance in much more detail. Anu?
Thank you, Sim. I'm now going to cover Section two of the presentation, which sets out the group's interim results for 2025. In the first half of this year, Standard Bank grew headline earnings by 8%, and headline earnings per share grew by 10%. Dividends per share also grew at 10%. Pleasingly, return on equity improved to 19.1%.
Within banking, we achieved positive jaws, and the cost to income ratio improved. The credit loss ratio ended at a similar level to the prior period. As Sim has covered, this performance was driven by continued robust franchise momentum in our underlying businesses. In a challenging period of low retail loan growth and declining interest rates, we are pleased that our diversified portfolio of businesses and revenue streams delivered continued good growth and returns. Slide 15 is our group income statement, illustrating the drivers of our 8% earnings growth.
Subdued net interest income growth was supplemented by strong non interest revenue growth to deliver total income growth of 7%. Costs were well managed at 6% growth. Charges for credit impairment increased by a small amount after a reduction in the prior period as a charge for corporate impairments normalized. Headline earnings from banking activities grew by 7% to R21 billion. Good performances from insurance and asset management activities as well as from our investments in ICBCS lifted earnings growth for the group to 8%.
The slides that follow cover our Banking business unit results. Slide 17 illustrates trends in deposit gathering over the last five years. In the last twelve months, deposits grew by 11% to ZAR2.3 trillion. Deposit growth benefited from strategic client acquisition, retention and entrenchment initiatives. In South Africa, customer deposits grew by 10%, driven by a larger client base and competitively priced offerings.
In Africa regions, customer deposits increased by 13%, driven in particular by strong momentum in the West Africa region. On Slide 18, we show lending balances over the last five years. In the most recent reporting period, growth in gross loans and advances to customers was 6%. Corporate lending grew by 12%, driven by strong investment banking origination across a variety of sectors. Retail and business lending growth was muted, as growth in disbursements was offset by higher repayments due to higher disposable income linked to lower interest rates.
A regional analysis of loan growth shows South Africa increasing by 5% and Africa regions growing a robust 13%. Across all our portfolios, our origination strategies remain prudent and selective and subject to customer affordability criteria. Slide 19 analyzes loan growth sequentially, with the first column showing the last six months of 2024, the middle column showing the first six months of 2025, and then the last column shows the twelve month growth we saw on the previous slide. You can see here in the most recent six month period, this is shown in the middle column, we have recorded loan growth accelerating in corporate lending, business lending, personal unsecured lending as well as in card. This demonstrates the good momentum in these businesses.
Vehicle and asset finance growth has slowed in the last six months as retail origination reduced, and this is driven by a strategic shift to focus on our own clients. This slide shows loan disbursements or payouts in the most recent six months. Investment banking disbursements across our network amounted to ZAR123 billion, building on the momentum we started to develop in the 2024 across a variety of sectors and especially in energy and infrastructure. Excellent growth in business lending disbursements in South Africa can be attributed to an increase in client demand for digitally originated flexible lending products and good client acquisitions in the 2025. Home loans payouts in South Africa have increased by a pleasing 9% to R23 billion.
Net interest income grew by 2% for the period to R51.4 billion. The waterfall graph on slide 21 shows our margin dropping by eight basis points to four eighty nine basis points. Balance sheet mix was positive for the margins in the period, due to higher margin growth in Africa regions outpacing growth in South Africa. Within Africa regions, local currency lending growth was strong, and this also benefited margins. The negative endowment impact of lower average interest rates was 24 basis points or billion.
This was mitigated by our endowment hedging programme, which contributed an additional million of downside protection in the period. While margin outcomes are in line with our expectation, asset growth has been slower than expected, which has resulted in lower NII growth than originally planned. The standout feature of this set of results for me is the excellent growth in net fee and commission revenue of 12% to R17 billion. Fees collected are an excellent indicator of client activity levels and franchise health. We are, therefore, particularly pleased with the 11% increase in fees recorded in PPB South Africa.
Client engagement with our digital platforms continued to accelerate, driving increased digital sales and transaction volumes. In this period, the group rolled out over three fifty new products and enhancements to the SPG mobile app, and we saw strong take up of value added services like the purchasing of vouchers. These activities contributed to the 8% growth in electronic banking fees we see in this slide. Arrangement and knowledge based fees were up 40%, linked to robust deal origination and advisory activities in CIB. Across the globe, we have seen record trading revenue performances from banks in the 2025 due to volatile markets triggered by tariff announcements and geopolitical uncertainty.
Our experience was no different, as clients looked for opportunities to hedge their positions in volatile markets, and group trading revenue grew by 20% to R11.8 billion. Our record revenues are testament to the scale of our Global Markets business, its market leading capabilities and its large and diverse client base. While opportunities for market making revenues were higher than normal in this period, client franchise related revenues remained at 80% of total global market revenues. Turning now to credit provisions on Slide 24. On the left hand side of the slide, you will see that the book growth was in line with the provision growth at 3%, and total coverage therefore remained intact at 4%.
Stage three loans, or non performing loans, remained consistent at 6% of the book. The increase in Stage three coverage is mainly driven by secured lending accounts progressing through legal stages, as well as deceased and insolvent estates, which are all taking longer to resolve and therefore attract higher provisions. This slide looks at loan performance trends specifically for our retail business in South Africa. The easing rate cycle, real growth in wages and lower inflation trends in South Africa have all contributed to improving the financial health of consumers. On the left hand side, we note a continuing declining trend of early delinquencies.
We attribute these declines to the steady improvement in consumer finances and increased outsourced capabilities with debt collection agencies, successful debt sales and redesigned customer assistance programmes, which have resulted in higher collections and slowed flows into nonperforming loans. On the right hand side, we show nonperforming loans continue to grow but at a much slower rate. At December 2024, we saw an encouraging dip in nonperforming loan balances, but this has subsequently risen due to the normal seasonality in these books. We are making slow progress working through these sticky NPLs, and as the reducing rate cycle takes hold, and supported by improving restructure and collection processes, we do anticipate fewer accounts to roll into Stage three. We believe these non performing loan balances will reduce in the second half of the year.
The income statement charge for credit increased marginally by 2% period on period. Credit impairment charges in the Retail and Business segments declined on the back of diligent collection strategies. Credit impairment charges relating to the corporate foot failure normalised off a low base in the prior period. The credit loss ratio was broadly flat at 93 basis points, and this is within our target range. This slide shows credit impairment charges of ZAR8 billion split by product.
Business lending saw a large decline in credit impairments due to improved early interventions for distressed clients and higher repayments. And corporate lending saw the largest increase of a very low base to account for single names which became nonperforming during this period. Operating expenses grew by 6% to just under billion. Annual salary increases, higher performance related incentives and a shift in headcount composition to specialist skills resulted in a 6% increase in staff costs. Total other operating expenses increased by 5%.
Software, cloud and technology related costs increased by 7% due to continued investment in digital capabilities, which has led to enhanced client experience and improved system stability and security, as referred to earlier by Sim. Other expense growth was driven by annual increases in municipal and utility rates and increased marketing and advertising linked to client campaigns. The rise in digital payments in South Africa has allowed us to reshape our branch infrastructure in a number of ways, as set out on Slide 29. We have largely moved cash handling out of branches and into ATM and cash centre infrastructure. For example, 84% of cash deposits and 97% of cash withdrawals are now done outside of branches.
Of course, this has allowed the number and average size of the traditional branches to be reduced. We currently have four ninety one branches in South Africa, of which 65 are cashless. Also, we have ramped up alternative and cashless points of representation, like kiosks inside retailers. These points of representation are innovative and relatively inexpensive access points where customers can conveniently open accounts and solve queries. Also, our mix of frontline staff has pivoted towards more multi skilled consultants rather than the traditional cash tellers.
The number of cash consultants in branches is 50% lower than in 2020. All these changes that we have made to optimise our infrastructure position us well in an evolving payments landscape. Total technology function spend, which includes software and cloud costs, technology staff costs, amortization and depreciation, increased by 6% to ZAR11.6 billion. Our revenue to total technology spend has stayed around a multiple of 7x for the last three reporting periods, which we believe is an appropriate measure of technology productivity. Over the last five years, savings in on premises technology costs and amortization have been invested in cloud and software subscription costs and technically skilled staff.
IT intangible assets on balance sheet are valued at ZAR8 billion as at June year, and this compares to ZAR21 billion in 2017. This shift illustrates our ways of working, changing from large, multiyear projects to smaller, agile projects, and shows our steady replacement of on premises owned and bespoke technology to utilising cloud based software as a service. We continue to focus on positive operating leverage. In this reporting period, total income growth again exceeded cost growth, resulting in positive jaws of 0.6% and an improvement in the cost to income ratio to 49.4%. That completes our banking analysis.
I'm now turning to insurance and asset management. Insurance and asset management headline earnings grew by 11% to billion, and the ROE improved to a very pleasing 19.7%. The significant improvement in the ROE was driven by both better earnings performance and the capital optimisation actions executed over the last two years. The ROE for this business prior to compensating the banking business units for business generated via their networks is an impressive 31.4%. Insurance operations delivered earnings growth of 21%.
This result was due to an improved performance from the South African short term business, with lower weather related claims and due to better than expected risk experience in the life insurance business and also improved persistency. Asset management operations grew earnings by 4% due to positive local and offshore investment market movements and improved customer inflows. On a constant currency basis, the Nigerian pension management business recorded robust double digit growth, driven by higher fees and growth in assets. The shareholder portfolio delivered a profit of R120 million, supported by favorable investment market outcomes. The solvency capital requirements cover of Liberty Group Limited and Standard Insurance Limited both remained strong.
Turning now to the Group's robust capital position. On Slide 35, we illustrate the progression of the Group's common equity Tier one capital ratio. The ratio has declined slightly since December due to higher distributions and growth in risk weighted assets. This ratio remains well above the regulatory minimum of 9.5%, which includes the positive cycle neutral countercyclical buffer requirements in South Africa, and remains above our internal targets of 12.5%. You can also see the group's liquidity ratios both remained well above the 100% regulatory requirements.
The graph on Slide 36 illustrates the buildup of common equity Tier one capital over time. And you can see how we think about our capital base in three buckets. Number one, the blue bars represent minimum regulatory capital and should grow in line with risk weighted asset growth. In the current period, we also see a step up to support the new regulatory requirement to hold capital for countercyclical buffers. This large capital base supports our ongoing franchise growth.
Number two, the grey bars represent internal capital buffers held for macro uncertainties and to bolster our resilience. This capital is available to absorb macro and business stresses that may arise. These buffers take our Common Equity Tier one ratio to 12.5%. And thirdly, the purple bars represent the capital available for expansion, dividends and share buybacks. While our operating environment today is highly uncertain, we have a large and robust capital base and a track record of proven capital management.
We are confident that we have the size and flexibility to both buffer downside risks and take advantage of growth opportunities that may arise. On this slide, the graph on the left shows the group ROE relative to the cost of equity, and the graph in the middle represents that gap as shareholder value added. The group's analysed ROE is 19.1%, well anchored in our current target range of 17% to 20%, and also well above the group's cost of equity. The graphs on the right show distributions to shareholder. Our interim ordinary dividend declared today is R8.17 dollars per share and equates to a dividend payout ratio of 56%.
In the current period, 69% of the group's earnings were returned to shareholders in the form of ordinary dividends, preference share dividends as well as share buybacks. We executed share buybacks totaling now billion over the last eighteen months. On Slide 39, we have represented the group's headline earnings by business unit on the left, by product in the middle and by legal entity on the right. Clearly, these charts illustrate the breadth and depth of our franchises. Across our four lines of business, we can meet individual and corporate needs throughout their life cycle, and we are uniquely positioned to serve our clients when individual and corporate and small enterprise needs overlap.
Corporate and Investment Banking remains our largest business unit, generating half of the group's earnings. On a product basis, transactional banking products were impacted by the negative endowment impact on our large deposit and transactional franchises. In the legal entity pie on the right, Africa regions contributed 41% of the group's earnings. On slide 40, we show the buildup of group earnings by business unit. Corporate Investment Banking saw strong earnings growth of 16% on the back of excellent income growth.
CIB generated an ROE of 22.9%. Personal and Private Banking earnings were flat on the prior period, and a return on equity of 20% was delivered. Within this result, PPB in South Africa grew earnings by 6%, and this growth was diluted by a decline in offshore earnings. Business and Commercial Banking earnings were 5% lower than the prior period, and a strong return on equity of 37.2 was delivered. Total income was flat on the prior period, with margins impacted by the lower interest rates.
I've already covered the key drivers of the insurance and asset management performance. ICBCS, via the group's 40% stake, contributed to million, and this is a 40% increase. The biggest driver of the ICBCS increase in earnings were higher client activity and trading opportunities linked to higher precious metals prices. This performance is expected to normalise somewhat in the second half of this year. On the left hand of this slide, we have shown our large local banking subsidiary, namely SBSA's earnings and returns over time.
In the current period of political uncertainty and low growth, revenue was up 6%, earnings up 2% and a return on equity of just under 16% was delivered. The analysis on the right hand side shows Africa regions split by sub region. Despite a complex and mixed operating environment, our portfolio of Africa Regions franchises delivered another excellent performance in the current period, with total earnings growth of 8% in rands and 13% in constant currency. Our overall return on equity of 27.2% was delivered. In the period illustrated here, the Africa Region's portfolios delivered an average annual growth rate in earnings of 15% in rands.
The portfolio diversification effect of these franchises is also evident here. Our highest return on equity is from West Africa Region. The strongest earning compound annual growth rate over the last five years has been from the East Africa region, and the largest contributor is the South And Central Region. We continue to look to these franchises to deliver strong earnings, growth and returns. I will now cover our expectations for the remainder of 2025.
First, from a macro perspective, and since we provided guidance in March earlier this year, our biggest change in expectation relates to GDP growth. Our GDP growth forecasts have been moderated down, particularly in South Africa, where we now see growth below 1% for 2025. Global turmoil due to U. S. Tariff announcements has been the main driver of our downgraded forecasts in South Africa.
Inflation expectations are slightly lower, but interest rate expectations have, on average, remained the same. And from a currency perspective, we still anticipate the gap between the rand and constant currency earnings to continue to narrow. Here, we are pleased to reaffirm our guidance for the group's three core metrics as follows: Banking revenue growth of mid to high single digits. While NII is expected to be lower than initially expected, NIR growth is likely to be higher, allowing total income growth to remain within our guidance range. Banking cost to income ratio is expected to be flat to marginally down year on year.
And the group return on equity will remain well anchored in the group's 2025 target range of 17% to 20%. Our guidance for credit loss, common equity Tier one and dividend payout ratios remain unchanged. The metrics represented here clearly demonstrate that the group is firmly on track to achieve the ambitious targets we set in 2021 for 2025. I look forward to returning to this podium in June time with every indicator still showing a green tick. As a group, our strategic focus is now firmly directed towards the future, ensuring success in the medium term while positioning ourselves for long term sustainability.
We remain committed to superior client experience, operational excellence and driving growth and returns for our shareholders. I will now hand over to Sim to take you through our focus areas to 2028. Thank you.
Thank you, Anu. As those green ticks indicate, we have very high confidence that we will reach the targets that we set for the end of this financial year. I now turn, therefore, to the group's medium term targets to 2028, as first announced at our 2024 results presentation earlier this year. Starting on the left of the slide, it's important to emphasize that our group is, in fact, four highly competitive businesses, each with a strong set of capabilities and each able to collaborate effectively with the other in service of our clients. As a result, we are uniquely well positioned to meet the full range of our clients' needs across their whole life cycle.
Next, the map of our beloved continent. We have well established local franchises in Africa, a network that we have been building for many years. As you can see, having received all the necessary approvals to open a representative office, we can now officially color Egypt in Standard Bank blue. Our office there will enable us to link our African and multinational clients more closely to the growing trade and investment corridor between Africa and the Gulf Corporation Council countries. The metrics next to the map reflect our unmatched scale across the continent, our established presence and deep local knowledge in each market, and the robustness of our portfolio.
We remain, quite simply, number one on the continent. And lastly, the eight points on the right hand side of the slide state our key competitive advantages, including our strong brand, highly competitive businesses, robust and efficient technology, deep management bench and fortress balance sheet. This slide summarizes who we are today, a formidable player on the continent. Importantly, we start our next phase from a position of strength. Confidence does not equal complacency.
As we all know, geopolitics are currently unusually volatile, and the global economic order is undergoing very rapid change. We have tested our twenty twenty eight targets against the range of known unknowns listed on the left of the slide by estimating their effects on our forecasts. As can be seen, even in the downside case, we expect that the group's ROE should at least reach the bottom of our 18% to 22 ROE target range in 2028. In the upside case, our ROE is in 2028 should be closer to the top end of that range. In March, we said that we would be pursuing three new growth opportunities to 2028 and beyond.
Here they are again. We intend to lead Africa's energy and infrastructure development, funding as much as possible of the immense demand for new infrastructure in Africa. We will also attract external funding both through our own advocacy and efforts and through the work that we are doing as part of the B20 process. We have market leading capabilities in the energy and infrastructure sectors and have made very good progress in mobilizing sustainable finance, as I said at the beginning of the presentation. We want to build Africa's leading private bank, and we are already very good at providing high end retail financial services in many markets and through our offshore hubs.
Our third growth opportunity is to optimize our portfolio to respond to client demand in Africa's growing economies. And as I mentioned earlier, we have just expanded our presence into Egypt. In the same way as we consistently report our other strategic progress, from now on, we will report the progress that we make in these areas. We will continue to protect and nurture the key enablers that support these ambitions. We value our brand.
It has been built over one hundred and sixty years. It represents the trust that our clients place in us each and every day. We will continue to protect it fiercely and to build on it. As Africa's number one rated employer in the Forbes World's Best Employers rankings for 2024, Standard Bank consistently works hard to ensure that we attract and retain skills. Standard Bank has diverse talent with a strong leadership succession pipeline.
This is a powerful competitive advantage which we'll continue to nurture. We'll continue to invest in technology to keep improving customer experience, develop innovative solutions and drive ongoing efficiencies. Our partners include our clients, our regulators and even sometimes our competitors as we work to firstly deepen our collective understanding of Africa's dynamics and opportunities, and secondly, develop the physical and technological infrastructure needed to drive financial services on the continent forward. Over the half, for example, as part of our B20 work, we are aiming to ensure that Africa's risks become more realistically and therefore better rated. Similarly, we continue to support the development of modern and robust domestic and cross border payment systems for Africa.
Here, finally, are the key takeaways we would like to leave you with today. First, that this has been a half of strong earnings, good balance sheet growth and improving returns second, that we are highly confident that we will reach the targets for 2025 that we set in 2021 and third, that we are confident in our ability to deliver compelling growth and shareholder returns over the medium term. We are now working towards our targets over this period, which runs from 2026 to 2028. Just to recap these: first, growing headline earnings per share at a compound annual growth rate of between 812% from 2026 to 2028 and second, lifting our ROE to within a new higher range of 18% to 22% by 2028. Thank you.
That concludes our presentation. We'll now take questions. If I may ask the BU heads and honor please to join me. Thank you. Let's start on the conference call. Operator, are there any questions?
Thank you. Our first question comes from Harry Werther of Bank of America Securities. Please go ahead.
Good morning, Simon Anno. Well done on the results.
Can you possibly give us a sense of the full year loan growth potential? And should we still think about higher Africa loan growth and South Africa going forward? And then links to those two questions, is there an upward trajectory we can think about in net interest income growth from the 2025 and possibly into 2026 as well?
Ono, thank you, Harry.
Hello, Harry. Nice to hear from you. We do expect a slight acceleration in loan growth. So just unpacking by business units, CIB continues to originate on a robust pipeline, so continued high loan growth in CIB. And we are seeing increased disbursements, as I had spoken about in the presentation, on BCB as well as PBB clients.
So we expect a higher loan growth into mid to high single digits for the second half. On margin, we obviously were down eight basis points. For the full year, it will be down a bit more than that. Next year, we also expect a slightly reduced margin on 2025. But if you put that together with the increased loan growth, we expect NII to grow low to mid single digit this year and then faster next year.
Africa regions, your question, we do expect it to grow faster. And just on AR, we must remember that the margins in Africa regions are over 7%, whereas in South Africa, they're around 3% to 3.5%. So as those books in Africa regions continue to grow faster, as they do every reporting period, the overall mix benefit is quite strong. On top of that, we've seen faster local currency growth local currency lending growth in Africa regions compared to foreign currency, and local currency does also come with higher margins. So that's also a mix benefit which we see coming through our margin analysis.
So it's not just an endowment story, but the mix is positive and an uptick in loan growth should also support our NII.
Thank you, Anu. Operator, any more questions?
Thank you, sir. But we have no further questions at this time.
Many thanks. Then on TeamSera, are there any questions from the webcast?
Thanks, Sim. The first question is from Baron Comore. With interest income growth offset by margin compression, what strategies are you being considered to enhance NIM, particularly in the face of competitive pricing in home loans and the corporate book?
Anat, do want to take it or do it by business unit?
Yes, maybe at a high level, and then maybe Funneka and Lovuyo can talk also to their specific books. As I mentioned already, we are growing Africa regions faster and that allows us to improve the overall mix impact. There also are BU specific pricing strategies, which I'll let Funeka and Lavoie talk about. And then I already mentioned also the local currency lending activity, which has increased and which is also supporting our margins in that basis. We have multiple funding optimization strategies as well.
You can see good deposit growth, and we continue to optimize our funding base. Currently, we're able to attract fairly good pricing in debt capital markets, and that also supports our liability pricing and continues to support our book overall and our asset lending then. But not sure if you want to add anything on mortgages, All
I can add thank you very much for the question. All I can add is, from a NIM strategy wise, is to grow secured, unsecured faster than secured and Africa regions faster than South Africa.
Johannes, thanks. Of course, for us, it's really important to make sure that we maximize client revenues at a client level more importantly rather than focusing specifically on NIMs. But having said that, on both sides of the balance sheet, we think the opportunity to grow more in our Africa regions business, as Anu mentioned, comes with more attractive NIMs. Sim talked about our focus on infrastructure lending that also tends to come with better NIMs. And then on the liability side, through our transactional banking business, client acquisitions, which allows us to grow our deposits and reduce the cost of funding overall for the business, will also contribute to that.
So we'd consider all of those with the primary focus on making sure that we maximize the overall financial benefit in the client relationships that we have.
Super. Sarah, any more?
Thanks. The next question is from Ross Krueger from Investec. On loan growth, do you expect the good sequential improvement in business lending to continue in the second half and into 2026?
William?
Perfect. Ross, thank you. Thanks for your question. So the improvement in loan growth is really a function of a lot of the work we've been doing over the last couple of years to strengthen those product capabilities.
So in enterprise products such as BizFlex, CAF has been substantially improved, and we're seeing much better origination there. In addition to that, at the upper end of the market, we've I think we've talked before about the structured lending capability that we've established and created within business banking. All of these things are starting to come together, and so driving loan growth. So I would expect strong loan growth going forward.
Anything to add, Ana?
No. Comfortable.
Sarah?
Thank you. Then I've got two more questions from Ross. The second question is, please, will you comment further on the Africa region's local currency book outgrowing the foreign currency book? What drove this trend? And is it expected to continue?
Anu or Luvio?
Maybe I can start from a CIB. What we've seen in CIB, our focus has traditionally been on focusing on global multinationals, and that remains core to our strategy. But we've also recognized the need to be able to improve our ability to bank the large local corporates, and that naturally does provide opportunities to be able to grow local currency asset side of the book. Secondly, we've also seen that in assisting in helping them manage the currency risk of operating across a continent that we are also starting to see large multinationals preferring to fund their businesses in local currency and therefore help manage their currency risk. And so both of those have assisted our CIB business, our book in general, to shift more towards local currency than previously.
Good. Maybe one more thing to add, both in our Retail and our Small Enterprise business. Our actual loss ratios in our lending books are quite low, as I had indicated on the slide. And this gives us an opportunity to think about risk appetite and extending more credit into these markets, and that would be local currency typically. And so we want to look forward to actually growing our local currency lending in both of these business units as well.
Thanks. The last question from Ross is around the change in NIM in the next six months and into 2026, which I think we've covered already. So I've got two questions from Chris Stewart. The first one is, do you, like your peers, see opportunities arising from muted regulatory changes for inorganic growth to scale up your operations in East Africa?
Can I take it, Ana?
Yes. Chris, for some time, we've been saying we do think East Africa is an attractive region for us. On the slide earlier, and I showed a CAGR of 21% in earnings coming out of East Africa. We know the growth rates in East Africa are typically around five even 6% real GDP growth rate.
On top of that, as Simer has indicated at the slide, through the Gulf Corridor, through Egypt, those flows trade flows specifically are accelerating and are increasing. We'd like to monetize those, and that obviously talks to our Egypt strategy as well through our rep office only at this point in time. So we'd like to grow faster. Inorganic, inorganic are strategies we are pursuing, and we'll let you know once we've been more specific on any inorganic opportunities.
Thanks, Vano.
Thank you. The second question from Chris Steuart. How should investors think about the track record of share buybacks that you've started to generate over the last eighteen months? Do you see this as an ongoing part of your capital management strategy?
Yes. Thanks, Chris. In a nutshell, in the absence of acquisitive capital deployment, we may well continue to do share buybacks. They may not always be at the volume we've done in the last eighteen months. I'll remind you that was ZAR7 billion.
And why that was particularly higher was, of course, also because of the capital which Liberty spun off into the group following their capital optimization activity. So we've completed that Liberty capital optimization activity now. But surplus capital going forward, what we're not paying to ordinary shareholders is dividends at a payout of the mid-fifty percent, we look forward to continue to do share buybacks. But as I indicated, I caution possibly not at the same rate as what we've done up to now and conditional on inorganic investments.
The next question is from Charles Russell. So morning, Sim, Anno and team, well done on some excellent results and new records. Can you please clarify the FX expectation of minus 1% in the context of Africa being up 8% versus local currency 13%, do you expect FY 2025 Africa growth in ZAR to be closer to the local currency levels, I. E, double digits or early teens? And can you comment on the ideal composition of Africa region's earnings, PPB versus BCB versus CIB, if relevant?
On a yes.
Charles, as you know, last year, we faced this huge currency deval in our accounts and saw that in our income statement and balance sheet. We're seeing that being washed out now. The currencies are relatively stable, as you would have noted as well. So by year end, we expect the currency impact to be even more muted. You can see it already being quite muted if you look at the year on year positions June last year to June this year.
In balance sheet positions, for example, there's hardly a currency impact there, constant currency versus rands, and we'll see that in the income statement as well then. So the answer is yes, more muted. Yes, I think is that all, Sarah?
The second question was, do you have an split for Africa Region's earnings between the three banking business units?
Yes. We drive the right business for our right clients, and we don't target a split. That's, I think, we're putting the carts before the horse.
I guess, yes, we've traditionally said that we grow on the basis of GDP growth. We follow what our clients do, and we also follow banking penetration. So depending on what happens in the relevant markets, we will meet client needs. So there's no ideal split in that sense.
That's all the questions. Thank you very much.
Thank you so much, Sarah. Folks, I think there are no more questions, and we have therefore come to the end of today's proceedings. Thank you so much to our shareholders and our other stakeholders for your interest, and thank you very much for your support. Have a good day.